What a financial tailspin may mean for you and me

[CHIMO]

As bank shares and stock markets plummet, and investors flock to the safety of government bonds; as obstinate EU leaders crucify their countries in a futile struggle to defend today's equivalent of the gold standard; as British and American politicians adopt austerity policies and drive their economies closer to the cliffs of depression; and as most professional economists stand aloof from the escalating crisis – what lies ahead for ordinary punters like you and me?

First, let's take look at the big political picture. This crisis is already sharpening the divide between left and right in both the EU and the United States. Studying a precedent – the implosion of the 1920s credit bubble in 1929 – we note that four years after that crisis erupted, the political divide sharpened decisively. The United States and Britain moved to the left. Germany chose a different path. After 1930, Germany's Centre party under Chancellor Brüning adopted austerity policies that resulted in cuts in welfare benefits and wages, while credit was tightened. At the same time the German government engaged in wildly excessive borrowing from the liberalised international capital markets. The ground was laid for the rise of fascism.

Four years after the "debtonation" of August 2007, our political classes in both the EU and the US have consciously declined to restrain out-of-control finance sectors or to fix broken, effectively insolvent banks. Instead, central bankers deployed taxpayer-backed resources (quantitative easing) to finance, guarantee and bail out bankers who then went on a wild, speculative spending spree.


At the same time, politicians imposed austerity on the more socially useful and productive sectors of the economy, both public and private. In both the EU and US these economic strategies have angered the populace and emboldened the right; in particular the far right. Looking ahead through the political lenses of austerity, street rioting and Tea Party obstructionism, the signs are ominous.

http://www.guardian.co.uk/commentisfree/2011/aug/19/financial-tailspin

[Gregorian]

1. Solid article. Hitler came to power during desperate financial times.

I've worried about that for ages. The 'Baggers are the ones who would vote for a Hitler, since they can't identify with the healthy left political kinds.

I love their Zappa quote.

[Denninmi]

2. Well, fascism is already here. The Tea Party is one Reichstag fire

short of becoming a full fledged fascist entity.

[Jackpine Radical]

3. Unsere Kristallnacht wird interessant sein, da bin ich sicher.

[gateley]

4. I'd like to read this aloud to Obama with Geithner in the room.

How could he dispute these facts? They're not interpretations, they're facts -- this happened!

This is key:

From austerity to street rioting to Tea Party obstructionism, the omens look bad for a world that hasn't learned from history

[Hydra]

5. It's ironic that President Obama wants to be a new Abe Lincoln

He could very well have a country that splits in half over this.

It would be near impossible to "mend" such a split. They'd probably have to kill everyone this time to accomplish it.

[dixiegrrrrl]

6. If we are LUCKY, we will emulate Japan's lost decades.

as opposed to full blown deeper and longer Depression.

Japan's culture does not seem to support street riots. Ours will.

[roamer65]

7. Let's see what $1T in quantitative easing does to the system.

I have rumors that is what is around the corner.

[abelenkpe]

8. It would mean absolutely nothing if there was no wage inflation

You see employers giving workers raises?

[Yavin4]

9. Precisely. Labor Is Excluded from Participating in Inflation.

Which is why unemployment is so high.